Beckham's Law, officially known as the special tax regime for posted workers, is one of the most attractive tax incentives for foreigners moving to Spain. It allows eligible individuals to be taxed as non-residents, which can lead to significant tax savings. But is it always the best option? Let's analyze its advantages and disadvantages in detail.
What is Beckham's Law?
This special regime allows individuals who move to Spain for work to be taxed under the Non-Resident Income Tax (IRNR) rules for the year they move and the following five years, even though they are tax residents. The main benefit is a flat tax rate of 24% on Spanish-sourced income up to €600,000, instead of the progressive rates of the standard Personal Income Tax (IRPF), which can go up to 47% or more.
Who Can Apply?
- Individuals who have not been tax residents in Spain for the 5 years prior to their move (previously 10 years).
- The move must be due to a new employment contract with a Spanish company or a posting from a foreign company.
- Since the "Startup Law" reform, digital nomads, entrepreneurs, and highly qualified professionals can also benefit.
- Company directors can apply, but only if they own less than 25% of the company's capital.
Pros (Advantages)
- Flat Tax Rate: A 24% tax on employment income up to €600,000 is often much lower than progressive IRPF rates.
- Simplified Wealth Tax: You are only taxed on your assets located in Spain, not on your worldwide assets.
- No Model 720: You are exempt from filing the informative declaration of assets abroad (Modelo 720).
- Tax on Capital Gains: Capital gains generated outside of Spain are generally not taxed in Spain (with some exceptions).
Cons (Disadvantages)
- High Income Required: It's most beneficial for salaries above approximately €60,000 - €70,000. For lower incomes, the standard IRPF might be more favorable.
- No Deductions: You cannot apply most of the personal and family deductions available in the standard IRPF (e.g., for children, mortgage, pension plans).
- Not for Everyone: It excludes self-employed professionals (autónomos) who are not in specific innovative sectors, and professional athletes.
- One-Time Opportunity: You must apply within 6 months of starting your job in Spain. If you miss the deadline, you cannot apply later.
Conclusion: Is It Worth It?
Beckham's Law is a powerful tool, but it's not a one-size-fits-all solution. It is crucial to perform a personalized analysis of your financial situation, income level, and family circumstances. For high-income earners without significant family deductions, the savings can be substantial. For others, the standard regime might be better.
Need help determining if Beckham's Law is right for you? Contact one of our tax experts for a personalized consultation.